RULE v. MAINSTREET CAPITAL PARTNERS LLC et al

Filing 98

ORDER GRANTING DEFENDANTS COLDIRON AND TURNER'S MOTION TO DISMISS - Defendants Coldiron and Turner's motion to dismiss Count II of Plaintiff's amended complaint, Dkt. 25 , is GRANTED; Count II of Plaintiff's amended complaint is DISMISSED. Defendant Scott Fankhauser's motion to dismiss Count II of Plaintiff's amended complaint, dkt. 29 , is DENIED as moot. Plaintiff's complaint may be amended again "only with the opposing party's written con sent or the court's leave." Fed. R. Civ. P. 15(a)(2). Any leave to amend must be sought by March 13, 2019. See generally id.; S.D. Ind. L.R. 15-1. If leave to amend is not sought or is denied, the Court will dismiss Count II with prejudice (SEE ORDER FOR ADDITIONAL INFORMATION). Signed by Judge James Patrick Hanlon on 2/13/2019. (DWH)

UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF INDIANA
INDIANAPOLIS DIVISION
NED P. RULE,

)
)
Plaintiff,
)
)
v.
)
)
MAINSTREET CAPITAL PARTNERS LLC, )
MAINSTREET INVESTMENT COMPANY
)
LLC,
)
MAINSTREET DEVELOPMENT COMPANY )
LLC,
)
MAINSTREET HEALTH LLC,
)
MAINSTREET HEALTH MANAGEMENT
)
COMPANY, LLC,
)
MAINSTREET ASSET MANAGEMENT,
)
INC.,
)
PAUL EZEKIEL TURNER,
)
JASEN COLDIRON,
)
)
Defendants.
)

No. 1:18-cv-00694-JPH-MJD

ORDER GRANTING DEFENDANTS COLDIRON AND
TURNER’S MOTION TO DISMISS
Defendants Jasen Coldiron and Paul Ezekiel Turner have filed a motion
to dismiss Count II of Plaintiff’s amended complaint under Federal Rule of Civil
Procedure 12(b)(6). Dkt. [25]. For the reasons that follow, that motion is
GRANTED. Defendant Scott Fankhauser also moved to dismiss Count II,
incorporating Defendants Coldiron and Turner’s arguments. Dkt. [29].
Because Defendant Fankhauser has since been dismissed from this case, dkt.
90, dkt. 93, that motion is DENIED as moot.

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Factual and Procedural History
Because Defendants Coldiron and Turner have moved for dismissal
under Rule 12(b)(6), the Court “accept[s] the well-pleaded facts in the
complaint as true.” McCauley v. City of Chicago, 671 F.3d 611, 616 (7th Cir.
2011).
Mainstreet—a collection of corporate entities specializing in real estate
development, value investments, and health care—hired Plaintiff Ned P. Rule in
September 2015 as its “Managing Director — Investment.” Dkt. 7 at 5 ¶ 30.
Plaintiff’s employment contract with Mainstreet included various guarantees,
including a compensation package “guaranteed for three years,” except in the
case of his termination “for cause.” Dkt. 7-1. Plaintiff was terminated around
November 15, 2017—a little over two years after his employment began. Dkt. 7
at 10 ¶ 72. No “cause” was given. Dkt. 7 at 11 ¶¶ 88–90.
Plaintiff now alleges three causes of action against several Mainstreet
defendants. Dkt. 7 at 1–3 ¶¶ 2–14, 11–16 ¶¶ 81–135. Defendants Coldiron
and Turner move solely for dismissal of Count II. Dkt. 25 at 1. They are the
only defendants remaining in Count II; a third defendant—Scott Fankhauser—
has been dismissed by joint stipulation of the parties, dkt. 90, dkt. 93.
In Count II, Plaintiff alleges that Defendants Coldiron and Turner
tortiously interfered with his employment contract when they “purposely
sought out a way to avoid [Mainstreet’s] contractual obligation” to Plaintiff.
Dkt. 7 at 13 ¶ 107. Specifically, Defendants attempted to “induce [Mainstreet]
to terminate Plaintiff’s employment in accordance with their own desires,” dkt.
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7 at 14 ¶ 109; “sought to find or invent a ‘cause’ to terminate Plaintiff even
though no such ‘cause’ existed,” dkt. 7 at 13 ¶ 108; and, when they could not
find or invent a “cause,” fired him without one, dkt. 7 at 14 ¶ 109. By doing
so, Plaintiff claims, Defendants Coldiron and Turner tortiously interfered with
his employment contract. Dkt. 7 at 14 ¶ 114.
Defendants Colidiron and Turner filed this motion to dismiss Count II
under Federal Rule of Civil Procedure 12(b)(6). Dkt. 25.
Analysis
I.

Legal Standard
Defendants may move under Federal Rule of Civil Procedure 12(b)(6) to

dismiss claims for “failure to state a claim upon which relief may be granted.”
Fed. R. Civ. Pro. 12(b)(6). To survive a Rule 12(b)(6) motion to dismiss, a
complaint must “contain sufficient factual matter, accepted as true, to ‘state a
claim to relief that is plausible on its face.’” Ashcroft v. Iqbal, 556 U.S. 662,
678 (2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007)). A
facially plausible claim is one that allows “the court to draw the reasonable
inference that the defendant is liable for the misconduct alleged.” Id.
When ruling on a 12(b)(6) motion, the Court will “accept the well-pleaded
facts in the complaint as true,” but will not defer to “legal conclusions and
conclusory allegations merely reciting the elements of the claim.” McCauley v.
City of Chicago, 671 F.3d 611, 616 (7th Cir. 2011).

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II.

Discussion
Count II is governed by Indiana law. See Land v. Yamaha Motor Corp.,

272 F.3d 514, 516–17 (7th Cir. 2001). To state a claim for tortious interference
with a contract, plaintiffs ordinarily must allege: “(1) the existence of a valid
and enforceable contract; (2) defendant’s knowledge of the existence of the
contract; (3) defendant’s intentional inducement of breach of the contract; (4)
the absence of justification; and (5) damages resulting from defendant’s
wrongful inducement of the breach.” Melton v. Ousley, 925 N.E.2d 430, 440
(Ind. Ct. App. 2010).
But Indiana law requires more when, as here, the plaintiff alleges
tortious interference against an agent of a party to the contract. The Indiana
Supreme Court has held that corporate officers—as corporate agents—cannot
be personally liable for tortious interference with the contract unless their
actions were outside the scope of their official capacity:
A party cannot “interfere” with its own contracts, so the tort itself can be
committed only by a third party. In the case of a corporation, the legal
entity acts through its directors and officers. Thus, when officers or
directors act in their official capacity as agents of the corporation, they
act not as individuals but as the corporation itself. In doing so, they are
not acting as a third party, but rather as a party to the contract and
cannot be personally liable for tortious interference with the contract.
Trail v. Boys and Girls Clubs of Nw. Ind., 845 N.E.2d 130, 138 (Ind. 2006)
(citation omitted).
Here, then, Plaintiff “must not only allege the basic elements of tortious
interference . . ., he must also allege some interfering act by [the] officers or

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directors that rests outside their authority as agents of the corporation.” Id. at
139.
Defendants Coldiron and Turner argue that Count II should be dismissed
because Plaintiff has not alleged that they “acted outside the scope of their
official capacity as agents of the corporation.” Dkt. 26 at 9. Plaintiff responds
by arguing that the Complaint does allege that Defendants acted outside the
scope of their authority. Dkt. 39 at 10. So whether Count II should be
dismissed turns on a single question: has Plaintiff alleged that Defendants
Coldiron and Turner acted outside the scope of their official capacity in
terminating Plaintiff’s contract?
Plaintiff says yes, pointing to his allegation that Defendants Coldiron and
Turner attempted to “invent[] and manufactur[e] a reason [to fire Plaintiff] in
accordance with their own desires.” Dkt. 39 at 5, 9; see dkt. 7 at 13 ¶ 108.
“This act of malfeasance,” Plaintiff claims, “takes their actions outside the
scope of their employment and into the scope of a personal conspiracy against
Plaintiff.” Dkt. 39 at 10. Plaintiff cites Florida-law decisions holding that
corporate parties to a contract (and their officers) can be held liable under a
tortious interference claim if they “act maliciously or with conspiratorial
motives,” dkt. 39 at 8–9, but he cites no Indiana authority in support of his
position.
Defendants Coldiron and Turner argue that Plaintiff’s allegations are
insufficient because, under Indiana law, even a personal, conspiratorial motive
to fire Plaintiff is not be enough to take their actions outside their official
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capacity. Dkt. 45 at 4. For support, they cite Trail, arguing that the plaintiff
there had made—and lost—the same motive-based argument that Plaintiff now
pursues. Dkt. 45 at 4. They argue that the Trail court rejected the claim that
corporate directors’ actions are outside the scope of their official capacity when
motivated by personal ill-will towards the plaintiff. Dkt. 45 at 4.
Trail is controlling here. Taking Plaintiff’s allegations as true, under
Indiana law neither the action of trying to manufacture a reason to terminate
Plaintiff nor the motive of personal, conspiratorial desire can take the
Defendants outside of their official capacity as agents of the corporation.
The alleged action itself—trying to manufacture a reason to terminate
Plaintiff’s employment—cannot serve as the basis for Plaintiff’s tortious
interference claim against Defendants Coldiron and Turner. The plaintiff in
Trail made a nearly identical allegation: that certain corporate officers
“contrived a study . . . the purpose of which . . . was to discredit [the plaintiff]
and justify his termination.” Trail, 845 N.E.2d at 133. The Trail court held
that this allegation was not enough to bring the defendant corporate officers
outside their official capacity because under “[b]asic corporate agency law”
corporate directors “enjoy a wide range of authorized powers,” including “the
authority to investigate and evaluate” employees. Id. at 139. Similarly,
Plaintiff here does not allege that the act of terminating employment
contracts—as a general category—is outside these Defendants’ authority as
agents of the corporation. Under Trail, even crafting a “contrived” and “biased”
report to justify a termination is within the scope of corporate authority. Id.
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Plaintiff’s allegation that Defendants Coldiron and Turner tried to come up with
a reason to support termination of his contract for cause where no cause
existed is no more than what was alleged in Trail.
Nor can the alleged personal motive pull that action outside Defendants
Coldiron and Turner’s official capacity. The plaintiff in Trail made a nearly
identical allegation: that the corporate officer defendants “acted out of ill will
towards [the plaintiff], making their actions personal rather than corporate in
nature.” Id. at 140. The Trail court held that the authority of a corporate agent
is assessed “irrespective of the supervisor’s motivations.” Id. (citing Martin v.
Platt, 386 N.E.2d 1026 (Ind. Ct. App. 1979)). Defendants Coldiron and
Turner’s motives thus cannot take their actions outside the scope of their
authority as agents of the corporation. Trail, 845 N.E.2d at 140.
For these reasons, Count II of Plaintiff’s amended complaint fails to state
a claim upon which relief can be granted and must be dismissed.
Conclusion
Defendants Coldiron and Turner’s motion to dismiss Count II of
Plaintiff’s amended complaint, Dkt. [25], is GRANTED; Count II of Plaintiff’s
amended complaint is DISMISSED. Defendant Scott Fankhauser’s motion to
dismiss Count II of Plaintiff’s amended complaint, dkt. [29], is DENIED as
moot.
Plaintiff’s complaint may be amended again “only with the opposing
party’s written consent or the court’s leave.” Fed. R. Civ. P. 15(a)(2). Any leave
to amend must be sought by March 13, 2019. See generally id.; S.D. Ind. L.R.
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15-1. If leave to amend is not sought or is denied, the Court will dismiss Count
II with prejudice.
SO ORDERED.
Date: 2/13/2019

Distribution:
A. Richard Blaiklock, M.
LEWIS WAGNER, LLP
[e-mail]
Steven P. Lammers
SMITHAMUNDSEN LLC (Indianapolis)
[e-mail]
Debra Ann Mastrian
SMITHAMUNDSEN LLC (Indianapolis)
[e-mail]
Lloyd J. Weinstein
THE WEINSTEIN GROUP PC
[e-mail]

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